American Apparel Gets $14.9 Million Investment That May Grow

April 26 (Bloomberg) -- American Apparel Inc., the clothing
retailer facing a possible cash shortfall, said it raised $14.9
million by selling stock to investors including founder and
Chief Executive Officer Dov Charney.

A group led by Michael Serruya and private equity firm
Delavaco Capital bought 15.8 million shares at 90 cents each
with the right to acquire 27.4 million more at that price, Los
Angeles-based American Apparel said today in a statement.
Charney, the largest stockholder, bought 800,000 shares and can
add 1.6 million. The deal would raise $41 million if the
investors exercise all purchase rights.

American Apparel is also in discussions to amend its
lending agreements with Bank of America Corp. and London-based
Lion Capital LLP to remove the “going concern” or similar
language from its 2010 year-end audit, the company said. The
retailer said last month in a financial statement that the
company is at risk of filing for protection from creditors
without better liquidity or an operational improvement.

“We believe in the American Apparel brand and we believe
in Dov Charney,” Serruya said in the statement. “We are
convinced that with adequate resources, Dov and his experienced
management team will lead American Apparel to new heights.”

American Apparel was unchanged at $1.58 at 4:15 p.m. New
York time in NYSE Amex trading. The shares, which plunged 42
percent in the first quarter, have surged 31 percent since April
20, the day before four people familiar with the process said
the board approved the deal. The stock traded at an all-time
closing high of $15.80 in December 2007.

Annual Loss

The retailer lost $86.3 million last year and repeatedly
amended loan agreements with Lion Capital to avoid breaching
debt covenants. Charney has blamed much of the losses and a
decline in sales on the costs and productivity declines related
to replacing 2,500 workers after immigration violations in 2009.

Charney’s investment marked the second time this year he’s
tried to shore up the company’s finances after last month paying
about $2 million for 1.8 million shares in a private placement,
according to regulatory filings dated March 24.

Serruya co-founded CoolBrands International Inc., which
owned the Chipwich and Eskimo Pie ice cream brands. The company
sold off its operations and last year merged with Swisher
International Inc., providing a public listing for the cleaning
company run by Wayne Huizenga.